A U.S. bankruptcy judge in Chicago said he won’t stop pending lawsuits against casino operator Caesars Entertainment Corp while its debt-laden subsidiary is in bankruptcy, several media outlets reported.
Judge Benjamin Goldgar ruled on Wednesday that the casino company isn’t immune to litigation, unlike its Caesars Entertainment Operation Co (CEOC) unit. The operating company entered voluntary bankruptcy under Chapter 11 of the U.S. Bankruptcy Code on January 15, 2015.
Caesars shares fell 41 percent to US$4.76 in New York trading on Wednesday, after plunging as much as 59 percent.
Caesars is facing several lawsuits in New York and Delaware from creditors over the company’s actions leading up to the bankruptcy. Creditors claiming some US$7 billion from Caesars have accused the Las Vegas-based company of saddling the bankrupt unit with too much debt and too few assets.
The casino operator has said that temporarily halting the lawsuits would permit it to keep negotiating with creditors in the hope of winning enough support for a plan that would allow it to exit Chapter 11.
On Monday, Caesars and CEOC announced they had agreed a restructuring agreement to be put to the latter’s second-tier debt holders. The parent company is aiming to reduce the operating unit’s debt by approximately US$10 billion, providing for the exchange of approximately US$18.4 billion of outstanding debt for US$8.6 billion of new debt.
If the creditors prevail in one of the cases, Caesars might be compelled to cover the unit’s debts, Bloomberg News reported. There wouldn’t be enough money to pay a multibillion-dollar judgment and the parent company might be forced into bankruptcy, a financial adviser for the operating company has testified, according to the media outlet.
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Alvin Chau Cheok Wa
Chief executive of privately-held VIP junket business Suncity Group